Financed ProjectsKurum International Corporate Loan I

Identification Code:

OP/07/0657

Total Operation Cost:

0

Maturity:

42 months

Operation Status:

Description and Purpose of the Operation:

BSTDB provides financing to Kurum International Ltd. Albania to address the Company’s investment related working capital needs and ongoing modernization and maintenance. The investment programme aims at the capacity increase, modernization and automation of existing facilities in Albania and respective increase in quality and value added production capability as well as cost cuts. In particular, the purpose of the financing is: - To provide long-term continuous and reliable electricity supply of about 185,000 MWh per annum to Elbasan Steel and Iron Plant ("ESIP" or the "Plant") and its facilities and guarantee 90% of total power supply to own needs of Kurum International; - To support expansion of production and export capacity of ESIP; - To assist Albanian Government to reduce growing import of electricity and dependence on dominated hydraulic power facilities; - To demonstrate viability of first private investment in power sector in Albania and galvanize interest of other investors; and - To render assistance to Kurum Steel Co. to gain first experience in power production and trade by minimizing involved risks.

Countries of Operation:

Albania (100,00 %)

Financial Product:

Loans

Sector:

Materials

Domain:

Private

Borrower/Client:

Kurum International Ltd. Albania was established in 1999 to expand the activities of Kurum Group (Turkey) in Albania. Kurum International is the largest steel producer in Albania with 70% of the country's market share, manufacturing and selling a variety of hot-rolled construction iron products to clients in Albania, the EU and the Balkans. The company is also involved in the production of liquid oxygen, lime and in boat construction.

Co-Financiers/Participants:

Guarantors/Sponsors:

Kurum Demir Sanayi ve Ticaret A. Sh. (or 'Kurum Steel Co.') –private steel company in Turkey, owns 100% of Kurum International Ltd. Albania

Developmental and Regional Cooperation Impact:

In supporting this Turkish investment in Albania BSTDB is able to promote regional cooperation and thus meet one of its key strategic priorities.

Environmental Classification and Impact (summary):

SScreened as B1. The general EH&S performance of the Elbasan Metallurgical Complex has been assessed as part of the first Environmental Audit commissioned by DEG and carried out by R&P International in March 2007. The auditors concluded that the operation is of high environmental and social relevance, where air emissions are the biggest concern. For instance the Plant does not currently meet all the local norms and standards, let alone the internationally applied industry specific standards (WB/IFC). Particularly the dust emissions in the steel plant as well as dust and sulfur dioxide emissions in the rolling mill and lime plant currently exceed these standards by far. Accordingly the auditors jointly with the Plant management drafted an Environmental Action Plant (EAP), which addresses all these non- compliances. It aims at raising the Plant’s performance and bring it as close as possible to the widely accepted industry specific performance standards, and recommends a set of short-, and long- term corrective actions which will need to be implemented by Elbasan. These focus on scrap processing, Meltshop, Rolling Mills, Lime Calcination Plant, as well as actions to improve the general environmental management of the Plant. If all actions are successfully implemented it can be expected that the operation will meet the applicable air emission standards. As part of the Loan Agreement the Borrower is required to implement the EAP, remain legally compliant at all times with EH&S legislation in effect, and report on annual basis on its EH&S performance.

Operation Leader:

General Industries, Transport, Tourism 2

E-mail:

gitt2@bstdb.org